THREAD
in islamic finance, as Muslims, it is easy to be offended at the suggestion that some of it might, in fact, be controversial and be breaking Shariah Rules.
However, we must recognise that there is significant amount of disagreement on a scholarly level about this.
in islamic finance, as Muslims, it is easy to be offended at the suggestion that some of it might, in fact, be controversial and be breaking Shariah Rules.
However, we must recognise that there is significant amount of disagreement on a scholarly level about this.
First of all, the main global body AAOIFI recognises that it is possible to try use contracts that are merely interest-bearing, and they make this warning in their Shariah Standards: 
AAOIFI goes on to state that some contracts are explicitly used as a trick to commit Riba while claiming to be Islamic:
We also have a famous pronouncement by the world-known Islamic Fiqh Academy, that declared the most popular Islamic Finance contract as deceptive, and containing Riba:
A paper called "Are Deposit and investment accounts in Islamic banks in Malaysia interest free?" by By Khairul Anuar, Shamsher Mohamed and Mohamed Eskander Shah suggests Islamic profit rates are explicitly linked to interest rates, and the difference is just "branding"
In another paper with an author from INCEIF, called "Are Deposit and Investment Accounts in Islamic Banks in Malaysia Interest Free?", it claims profit rates are significantly influenced by interest rates, and this impacts reputation risk:
A paper called "Jurisprudence on Tawarruq: Contextual Evaluation on Basis of Customs, Circumstances, Time and Place" states there are essentially two groups of scholars with different views:
In the paper "Liquidity Management by Islamic banks" by Ayub M, there is a quote from someone from IDB and INCEIF, and suggests Islamic finance has crossed the threshold of convergence to conventional finance, and that Islamic banks have a trust:
the paper "Liquidity Management by Islamic Banks: An Issue or a Contrivance for Risk free Returns" talks about the spirit of Islamic finance being lost:
The paper "Dichotomy between Sharī‘ah Compliance and the Economic Goals of Islamic Finance Institutions" talks about risk of loss of credibility of Islamic finance:
The paper "Extensive use of Hiyal In Islamic banking and Finance" powerfully condemns the use of ruse or tricks in Islamic finance:
In this powerful paper by the Head of Shariah Office at Abu Dhabi Islamic Bank, talks about AAOIF rules on Tawarruq not being practiced virtually anywhere inteh industry:
On the website Islamqa, this scholar claims that other muftis seek loopholes and use weak claims to make fatwa, and has a powerful warning:
For those who say this is all about Tawarru only, this is wrong. That contract forms the basis of around 70-90% of ALL transactions in Islamic finance. Even attempts to move away from this contract are doomed to failure.
Let me explain - the inherent nature of banking that
Let me explain - the inherent nature of banking that
makes Tawarruq impermissible means any replace will also have severe flaws. This is shown PERFECTLY in the attempts by Islamic banks to use profit and loss sharing and equitable contracts like Mudarabah and Wakala. There is a public paper that mentions the concerns the banks
have with such products that try to move away from interest:
First of all, the money is still directed to interest bearing debt instruments:
First of all, the money is still directed to interest bearing debt instruments:
Also, they stated that banks CAN agree to make this behave like interest, but they can not actually tell the other party:
And explicitly makes clear these returns are always linked to LIBOR, which is an interest rate:
This, clearly and irrevocably shows the clear conflict between genuine risk sharing and the inability of banks to get away from interest on an existential and structural level. That is why attempts to use better sounding contracts like Mudarabah, Profit sharing, Ijara
Wakala and so on can NEVER be truly implemented by banks, all that happens is that the interest is hidden in a more clever way, so the layman can not spot this.
May Allah protect us from our own deceptions.
May Allah protect us from our own deceptions.
To summarise, we MUST accept, as Muslims, there IS a real problem here - and acknowledge the depth of data that confirms this, and the breadth of scholars and academics who have been discussing this for many, many years.
Our ignorance is a choice.
/THREAD
Our ignorance is a choice.
/THREAD
